Saudi Arabia: Russia doesn’t deserve a market share

The Minister of Energy of Saudi Arabia Ali al-Naimi has attracted public attention after an interview given to Middle East Economic Survey (MEES).

Earlier, the minister said that Saudi Arabia doesn’t care about how low the oil price falls:

“Should it fall to $20, $40, $60 – it makes no difference to us.”

In an interview the minister explained that Saudi Arabia can afford not to care about the oil price. But for Russia, in contrast, this is not possible, because it is inefficient, and would not be able to stop production of oil even if wanted to.

Low oil prices have a negative impact on Russian economy because the country depends on oil. This leads to devaluation of ruble, so Russia can not repay its debts. The Russian Central Bank has had to provide financial support to one of its private banks. A full collapse of the Russian economy is very possible. Russia can not cut the production of oil (although it would help to raise the price), because its fields and technology are “not as good as the Saudi”, says Minister:

“The problem with deposits is that you need to constantly invest in new wells, not leaving the old ones at the same time, because if this happens, nothing comes from them.In this respect, Russia is quite cautious, especially in Western Siberia where mining has been going on for a long time, and stocks are being phased out”.

Al-Naimi said that the real reason why Saudi Arabia, unlike Russia, does not expect a collapse, is that the Saudis have always been careful and efficient producers, and made sure to save a lot of money for a “rainy day” like this one.

Everyone is wondering whether it is the time for Saudis to cut oil production to rise the price again.It would have saved countries such as Russia from collapse, since they require the price of $105 per barrel.But why should Saudi Arabia suffer from Russia’s mistakes – asks al-Naimi.In an interview with MEES he said that Russia “does not deserve a market share” and explained his position:

“Strategy of Saudi Arabia is also an attempt to protect highly efficient countries, not just our own place in the market.We want to tell the world that only highly efficient countries deserve market share.This operating principle held by all the capitalist countries”.

Al-Naimi sees no reason to sacrifice, and said that OPEC should keep production at current levels:

“I want to make one thing clear: it is unfair to ask OPEC to cut production.We do not supply too much: less than 40% of the world oil supplies.However, we are the most effective.We have analyzed the situation, and came to the conclusion that reducing oil production is meaningless for us”.